With the gradual opening up of the economy, the life insurance industry is back on a sequential growth path.
During the first half of this fiscal, ICICI Prudential Life Insurance’s overall 13th month persistency was at 82.1%, which was one of the best in the industry, although during the peak of the lockdown in the first quarter, it saw a marginal decline in persistency, said chief distribution officer Amit Palta. In an interview with Mithun Dasgupta, Palta said the company has so far settled death claims worth Rs 198.60 crore related to Covid-19. Edited excerpts:
ICICI Prudential Life’s new business premium in November grew 0.95% year-on-year against a 5.15% y-o-y de-growth for all private sector life insurers. On the other hand, while the private insurers witnessed a 3.92% y-o-y growth during April-November, your company’s new business premium during this period fell 8.93% y-o-y. What are the reasons behind this performance?
With the gradual opening up of the economy, the life insurance industry is back on a sequential growth path. The pandemic has resulted in increasing awareness on the importance of life insurance as a financial safety tool ensuing steady demands for protection products. At ICICI Prudential Life, the share of protection in the total annualised premium equivalent has grown to 20% during HI FY21 from 14.8% in the corresponding period last year. The protection segment constitutes of innovative term products like ‘iProtect Smart’. Owing to the market volatility and economic environment during this period, our unit-linked business had shown a decline on a year-on-year basis. However, we have started witnessing sequential improvement, with the second quarter’s ULIP growing by almost double over the first quarter. We were able to capitalise on the non-linked saving opportunity with this business segment registering a robust growth of 34% in H1FY21 over H1FY20, which was also higher than the growth rate for the overall market. This has helped us in achieving private market leadership with a market share of 12.5% for H1FY21 on the basis of total new business sum assured, which includes both savings and the protection business.
Last fiscal, the company’s new business premium had grown over 20% year-on-year. Amid Covid-19 pandemic, what kind of growth you are expecting for this fiscal? As the company has completed 20 years and has crossed 2 lakh crore assets under management (AUM) in the 20th year, what are the near-term growth strategies for it?
Given the nature of the life insurance industry, we believe the Value of New Business (VNB) is the appropriate metric to ascertain the business’s profitability. VNB is the present value of future profits from the new policies written in the period. In Q2FY21, we reported a robust VNB performance with the VNB margin improving to a market-leading value of 27.4% from 21.1% in Q2FY20. Furthermore, through our well-diversified balance sheet and prudent investment strategy, we have ensured that the company has zero non-performing assets (NPAs) in its portfolio, reinforcing our strength and stability even in times of market turbulence and uncertainty. We have set ourselves an aspiration to double our FY2019 VNB by FY2023. We are confident that the 4P strategy of premium growth, protection business growth, persistency improvement and productivity enhancement will enable us to achieve this objective.
Are you witnessing some pressure on persistency levels for market-linked and endowment products? What are the strategies the company is taking to address it?
We have been witnessing consistent improvement in persistency over the years, which also directly flows into AUM growth for the company. In H1FY21, our overall 13th month persistency was at 82.1%, which is one of the best in the industry. Our protection persistency has improved among the business segments and our non-linked savings persistency continues to be at similar levels as last year. During the peak of the lockdown in Q1FY2021, we saw a marginal decline in persistency. With the gradual opening up of the country in the subsequent months, we saw an improving trend in unit-linked persistency. We believe this trend will continue as building a long-term savings pool continues to remain one of the priorities for consumers.
How many death claims pertaining to Covid has the company received so far and what has been the claim size? Of that, how many have been settled and what is the claim amount paid?
We have settled death claims worth Rs 198.60 crore related to Covid so far. The digitalisation initiatives implemented by us have enabled us to settle genuine claims quickly. Our ‘Claim for Sure’ service initiative promises to settle genuine death claims in one day after receipt of all documents. As of October 30, 2020, we have settled claims amounting to Rs 270.405 crore under the ‘Claim for Sure’ service initiative.